If it looks like a bank won't meet the Federal Reserve Bank's reserve requirement, normally it will first turn to the:
A) other member banks and borrow at the federal funds rate.
B) Fed and borrow at the discount rate.
C) open market and borrow money there.
D) Congress to borrow funds.

Exhibit: Money Creation
The reserve requirement is 20%, and Leroy deposits his $1,000 check received as a graduation gift in his checking account. The bank does NOT want to hold excess reserves.
Reference: Ref 13-2
(Exhibit: Money Creation) What is the maximum expansion in the money supply possible?
A) $1,000
B) $1,800
C) $4,000
D) $5,000

21. Exhibit: Money Creation
The reserve requirement is 20%, and Leroy deposits his $1,000 check received as a graduation gift in his checking account. The bank does NOT want to hold excess reserves.
Reference: Ref 13-2
(Exhibit: Money Creation) By how much did the monetary base change?
A) $0
B) $800
C) $1,000
D) $4,000

The money multiplier is equal to:
A) the ratio of the money supply to the monetary base.
B) the ratio of the monetary base to the money supply.
C) the money supply divided by the reserve ratio.
D) none of the above.

24. If a bank has deposits of $100,000, cash on hand of $10,000 and $15,000 on deposit at the Federal Reserve, and the required reserve ratio is .20, then the bank:
A) has no excess reserves.
B) has excess reserves of $5,000.
C) has insufficient reserves to meet requirements.
D) has an insufficient deposit to loan ratio.

25. Suppose the banking system does NOT hold excess reserves and the reserve ratio is 20%. If Sam deposits $500 of cash into his checking account, the banking system can increase the money supply by:
A) $5,000.
B) $2,000.
C) $2,500.
D) $400.

Which of the following actions would allow banks to lend out more money?
A) an increase in the required reserve ratio
B) a decrease in the discount rate
C) an increase in the federal funds rate
D) an increase in the required reserve ratio coupled with an increase in the federal funds rate

30. The Fed controls:
A) the discount rate.
B) the monetary base.
C) the reserve ratio
D) all of the above.

31. If the Fed conducts a $10 million open-market sale and the reserve requirement is 20%, the monetary base will:
A) increase by $10 million.
B) increase by $8 million.
C) decrease by $10 million.
D) decrease by $50 million.

If a bank has assets equal to $100 million dollars, according to practice, its liabilities should NOT exceed:
A) $7,000.
B) $70,000.
C) $93,000.
D) $107,000.

16. Suppose a bank has excess reserves of $800 and the reserve ratio is 20%. If Andy deposits $1,000 of cash into his checking account and the bank lends $600 to Molly, that bank can lend an additional:
A) $200.
B) $1,000.
C) $800.
D) $2,400.

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